BTIG analyst Walter Piecyk weighed in with a few insights on Sprint Corp (NYSE:S), after the telecom company announced a new note offering in an effort to raise up to $3.5 billion in cash against a portion of the company’s spectrum portfolio.
Piecyk noted, “The intent of the deal is to lower Sprint’s borrowing costs by replacing more than $4 billion of higher cost unsecured debt that is maturing over the next four quarters with this new secured debt. Sprint has effectively securitized a variety of assets in order to reduce the amount of higher cost unsecured debt. Interestingly, the implied spectrum valuation of the deal indicates a material step up in value of spectrum values over the past few years, at least according to Aetha Consulting, the third party appraiser that was used to value the spectrum.”
“We estimate that Sprint is valuing principally 2.5 GHz spectrum at $1.85/MHz/POP, which is more than 6x the $0.30/MHz/POP it effectively paid for this spectrum when it acquired Clearwire in 2013. pecifically, Sprint’s release indicates that it valued 14% of its spectrum holdings at $16.4 billion as part of the transaction. We estimate that the company owns 63.2 billion MHz-POPs […] which implies that more than 8.8 billion MHz-POPs of spectrum are included in this transaction. We estimate that over 85% of the spectrum in the lease deal is 2.5 GHz with the balance of the spectrum in the 1.9 GHz band,” the analyst continued.
As usual, we like to include the analyst’s trackrecord when reporting on new analyst notes. According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Walter Piecyk has a yearly average return of 8.1% and a 55% success rate. Piecyk has an 15.1% average return when recommending S, and is ranked #801 out of 4183 analysts.
Out of the 22 analysts polled by TipRanks, 3 rate Sprint stock a Buy, 13 rate the stock a Hold and 6 recommend a Sell. With a downside potential of 25%, the stock’s consensus target price stands at $5.10.